The Energy Scoop – OPEC Opts to Not Cut Production
Oil prices continue to fall as OPEC decides against reducing their oil production quota. In addition, a new method of transporting oil will prove costly and green energy projects are predicted to receive $250 billion in investor funding.
Following OPEC’s decision to maintain their crude oil production quota of 30 million barrels a day, industry experts believe that the oil industry will be heading towards a slower recovery as growing supply outpaces demand. WoodMackenzie Ltd predicts that by the end of 2015, the country will see changes reflective of the US oil price floor that will inevitably impact future spending decisions. “With Brent below $75-80/bbl and WTI falling below $65-70/bbl, the market will test the US tight oil price floor, act to slow medium-term oil supply growth beyond the US, and challenge OPEC resilience to hold to its current production levels,” said WoodMac.
The US Pipeline & Hazardous Materials Administration recently proposed a rail tank rule that will serve as a safer method of transportation for crude oil and ethanol. Due to various factors including the shift from rail to highways, modification of tank cars, and lost service time from tank cars undergoing modification, the project is expected to cost upwards of $60 billion. Despite the high costs, experts believe that the tank car modifications will provide additional benefits such as greater efficiency and a thermal protection system.
Oil prices continue to decline, having reached below $65 a barrel marking this week’s price as the lowest since July 2009. Despite reducing output in November, OPEC’s oil supply exceeded its target for the sixth straight month, pumping 30.56 million barrels a day. “It’s essentially being left up to demand and supply fundamentals, which could mean its going to take a while before the market is ultimately more balanced,” said Daniel Hynes, senior commodity strategist at Australia and New Zealand Banking Group.
As oil drillers are reducing spending budgets for future development, renewable energy projects are expected to receive $250 billion in investor funding. Following the push for renewable energy, many countries are providing incentives for limiting greenhouse gases and promoting alternative energy. However, despite public policy, experts believe that low oil prices could possibly interfere with the green energy movement,“ Weakening oil prices would hamper the competitiveness of new energy. The government has to subsidize the new energy industry to support its development,” said Lin Boqiang, director of the Energy Economics Research Center at Xiamen University.
